Patient Capital Management, a value investing firm, released its “Patient Capital Opportunity Equity Strategy” third quarter 2023 investor letter. A copy of the same can be downloaded here. During the quarter the strategy returned -6.0% net of fees compared to the S&P 500’s -3.3% return. As the quarter demonstrated, the markets are uncertain. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Patient Capital Management highlighted stocks like Delta Air Lines, Inc. (NYSE:DAL) in the third quarter 2023 investor letter. Headquartered in Atlanta, Georgia, Delta Air Lines, Inc. (NYSE:DAL) offers air transportation for passengers and cargo. On November 1, 2023, Delta Air Lines, Inc. (NYSE:DAL) stock closed at $31.11 per share. One-month return of Delta Air Lines, Inc. (NYSE:DAL) was -14.63%, and its shares lost 2.69% of their value over the last 52 weeks. Delta Air Lines, Inc. (NYSE:DAL) has a market capitalization of $20.018 billion.
Patient Capital Management made the following comment about Delta Air Lines, Inc. (NYSE:DAL) in its Q3 2023 investor letter:
“Airlines returned to trough multiples as higher oil prices pressured costs. Historically, airlines have passed these costs on to customers. We think Delta Air Lines, Inc. (NYSE:DAL) is a premium brand valued like its economics aren’t sustainable. With mid-teens returns on capital, significant free cash flow generation, excellent capital allocation and long-term earnings per share growth in the high-single to low-double-digits, we think the company is significantly mispriced.
Delta Air Lines Inc. (DAL) reversed course in the third quarter, falling 24% from its highs in July. The airlines in general were hurt from rising commodity prices that are leading to increased cost per available seat mile (CASM). Historically, airlines have passed on higher fuel prices to customers with a lag. We see Delta as a premium global consumer brand that is materially misunderstood by the market. The market still sees airlines as a cyclical, bankruptcy prone industry. An improved supply-demand picture, management discipline and a better business mix make Delta a more resilient business. Their loyalty program with American Express is a source of stable and growing revenues with $6.5B in remunerations this year with a goal of reaching $10B by the end of the contract in 2028. Premium and ancillary service revenue should generate 65-70% of the total in the next year or two. The company should continue to generate consistent mid-teens returns on capital. As the market begins to understand, we believe the company will continue to be rewarded. On top of this, free cash flow is expected to expand generating a cumulative ~$11B from ’23-’25, or one-half of its current market cap. As the company pays down debt while growing the dividend and eventually resuming share repurchases, we think the stock will continue to trend higher.”
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Delta Air Lines, Inc. (NYSE:DAL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 56 hedge fund portfolios held Delta Air Lines, Inc. (NYSE:DAL) at the end of second quarter which was 56 in the previous quarter.
We discussed Delta Air Lines, Inc. (NYSE:DAL) in another article and shared Alluvial Capital Management’s views on the company. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
